Fasten your seat belts. It's going to be a bumpy night. -- Bette Davis as "Margo" in All About Eve

News this morning that Bank of America (BAC) and Citigroup (C) may need to raise capital in order to avoid undue "stress" is helping to give us a weak open. We also have news of further swine flu breakouts, some downgrades of banks and weak action overseas.

With major earnings reports winding down, the primary government stimulus and bailouts plans already announced and a big jump in hope that the economy is turning, we have plenty of obstacles to further upside. The market has been chugging along quite nicely since the March lows and has given us some classic "climb the wall of worry" action as well as some performance anxiety. It has been awfully difficult for many investors who were burned badly over the past 18 months to set aside their worries and concerns and jump back in.

What has been most interesting about the rally off the March low is how widely it has been embraced as not just a bear-market move but as the end of the bear market. Like many, I've maintained a high level of skepticism and have not been very aggressive on the long side. Even among the bulls, this rally has required some blind faith, as much of the gains have come on surprise news from the government rather than on economic or earnings news. We've seen some very good earnings reports as expectations have been quite low, but forward guidance still indicates a rocky road.

The market, specifically the S&P 500, has been in a trading range for two and half weeks after gapping up on the Thursday before the Easter holiday when Wells Fargo (WFC) announced it would beat earnings expectations. Since then we have seen very aggressive trading in some of the more speculative small-caps and have been helped out by good reports from the likes of Apple (AAPL) , Amazon (AMZN) and Microsoft (MSFT) , but we are seeing some signs of weakening action.

Yesterday the outbreak of swine flu dominated the news and was used as an excuse for some selling. Overall, that selling was pretty mild given how far the market has come, but we lost some momentum and the dip-buyers were not as energetic as they have been. Overseas markets were shaky overnight, and news that banks need more capital is putting pressure on things. This will be a good test to see if the dip-buyers retain their desire to jump in quickly on each pullback. They have done that steadily for a while now and have helped hold this market up for longer than many have expected.

We can pull back quite a bit at this point without completely killing the move off the March low. We can go to 825 on the S&P 500 and 1600 on the Nasdaq and still be within the recent trading range. The good thing about a correction and/or consolidation is that it will help separate the good stocks from the bad and allow stock-picking to come to the forefront. Stock-picking hasn't mattered a whole lot until just recently, as the market was mostly moving as a single monolith. In the last few weeks we've seen many more pockets of speculative action, which signals that traders are working harder to find individual stocks rather than just reacting to macro market and economic news.

Don't be discouraged if we start seeing a pullback in the overall market. The good news is that the nature of trading has changed recently, and that is likely to continue and reward us with better opportunities. At the moment it looks like the pressure is on the banks, and that is going to cause some problems, but we need for some tests of the downside.

It looks like a bumpy ride today, so adjust your trading helmet before you strap yourself into the trading turret. Good luck and go get 'em. -----------------------------Ülespoole avanevad: